Here’s what the jobs report means for mortgage rates

In what was a surprise to market observers, the economy added 243,000 jobs in January, the most in nine months. The unemployment rate had an impressive showing of its own, falling to 8.3 percent.

Estimates for the January report varied. While a group of economists surveyed by MarketWatch predicted 121,000 new hires last month, HSH.com expected 180,000.

Both November and December’s job numbers were revised higher, meaning January’s numbers could be even more impressive than they already are.

Time to celebrate?

Despite the best job numbers we’ve seen since last April, many experts warn that while this is certainly another sign that the economy is inching its way in the right direction, not to get too excited over the latest employment report.

“There are some caveats to what’s a pretty strong report,” Sam Bullard, senior economist at Wells Fargo, told MarketWatch.com. “I am still cautious as to whether we have stepped up the level of hiring to the 200,000 to 250,000 range.”

Keith Gumbinger, vice president of HSH.com, echoed those sentiments to me in a recent email.

“It’s a truism that ‘jobs beget jobs,’” wrote Gumbinger. “More people hired means increased consumer spending (with some lag) which tends to promote business profits, confidence and therefore promotes more hiring to meet increased demand. In this environment, though, I’d bet that there will be a rather more cautious approach. The economy and consumers are still very vulnerable to shocks.”

Mortgage rates to rise

The markets have reacted quickly to today’s report. The Dow Jones Industrial Average added 100 points in the early going, according MarketWatch, and 10-year Treasury yields were also on the rise, increasing by 11 basis points earlier this morning. “That should bump mortgage rates up a little bit as we head into next week,” said Gumbinger.

How much of an increase are we talking about?

One strong monthly showing isn’t enough to put serious upward pressure on mortgage rates. That said, as long as the economy remains on an upward trajectory and deflation doesn’t become a cause for concern, mortgage rates aren’t going to decline on a consistent basis. Should the economy continue to strengthen, we may even see the Federal Reserve change their “2014” tune before too long, said Gumbinger.

It makes sense to show proper respect for the challenges the real estate industry still has ahead of it as there are still too many “empty homes” (no equity for the seller to buy another home) on the market that must be sold.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog,
which concentrates on the latest developments in the mortgage and housing
markets.